Michael Hicks: China is a poor and backward nation

With both the United States and China doubling down on a trade war, and heated electoral rhetoric giving way to full fabrication, it’s time to write a bit about China. Today and well into the future we should all understand some of the economic and security issues that form our relationship. To do so, we must also untangle some of the fabulist lies told about the Chinese economy.

I will begin with some bona fides on the topic. Most readers will know I am an economics professor, but for most of my life, I was also a soldier. From 2003 through 2009, I served as a reserve infantry lieutenant colonel on the operations and planning staff of U.S. Army Japan and the UN command in Korea. I cannot say more than what should be obvious that both North Korea and China were much on our minds. It is worth noting that I squared off against Chinese tanks and faced fire from Chinese rockets in Iraq in 1991, so my experience is a bit different from that of marginally informed citizen or detached academic. I am a fierce but realistic critic of China, but that isn’t the same thing as fearing them.

China may ultimately prove a significant strategic threat to the United States. The nation is poorly led, and so wholly ensnared in the failed dogmas of Lenin and Mao that we must view it as a potential long-term adversary. The reason we must view them as a security concern is not that they are an economic dynamo, but rather because their economy is so desperately bad and likely to remain so throughout this century.

China is a poor nation, which exaggerates their economic performance. By some measures, their GDP per capita is now at levels last seen in the U.S. before our civil war. I suspect conditions are a bit better, with standards of living more like ours at the turn of the 20th century. That is still bad, and means crowded, disease ridden, densely populated tenements, and factories like those described by Sinclair Lewis in "The Jungle," and lived by the victims of the infamous Triangle Shirtwaist Fire. Chinese workers die on the job at more than three times the rate of the developed world, if they are telling the truth.

Like all Leninist-Maoist nations, China can put on a show. Bright gleaming factories, cheerful workers and efficient transport systems are hallmarks of Chinese propaganda. To get these shiny factories, and raise their standard of living to that of late 19th century Europe, the Chinese have been crushingly authoritarian. Though they try to avoid any visible semblance to the Maoist debacles, they have purged entrepreneurial spirit and succumbed to the worse examples of central planning. In a nation living in cramped, multi-generation apartments, newly constructed cities capable of housing one million workers sit empty.

Their recent reforms have largely failed. For anyone who was a college student in the 1980s and early 1990s, Chinese graduate students were feared for their unequaled preparation. Only the top students from the world’s most populous nation came here to study. Today, it is mostly the children of the party elite who fill American schools, and the change is obvious.

Let me say it plainly. China is a large, poorly led nation with a military that is decades away from the expertise of Saddam’s army and an economy that is more than a century behind ours.

When you hear a politician telling you that China’s economy is just a few years away from surpassing ours, he is simply lying to you. No one living now will see the Chinese standard of living catch up to ours, and I would wager they won’t equal America’s current standard of living in the balance of this century.

To be clear, China’s weak economic performance is not a good thing. In the short term, the U.S. and China share many common concerns, not least among them the special sort of crazy known as North Korea. We would be better off if they had a more robust capacity to deal with that problem.

Over the long run, continued poor economic performance likely increases rather than lessens the risk of conflict. A growing economy and a growing middle class are the most helpful antidotes to Chinese aggression in decades to come. Any movement towards modernity in China will come from within. This won’t be possible until its economy has made more gains.

Our challenges with China aren’t easy, or primarily commercial. In fact, the Trans-Pacific Partnership was the ideal platform from which to challenge a China unconcerned with property rights and worker protections. Instead, we descended into an irrational and counterproductive trade war, which is precisely the wrong approach. It won’t make us safer, wealthier or stronger. Perhaps the only good thing to say about it is that the unfolding economic disaster of tariffs will teach the current generation a lesson in the cost of trade wars.

Michael Hicks is the George and Frances Ball Distinguished Professor of Economics and the director of the Center for Business and Economic Research at Ball State University.